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Assuming that you don't have any other debt and your income is within limits for full contribution to Roth IRAs, I would put $2k in a Roth for yourself (2001 full contribution), $2k in a Roth for your spouse (2001 full contribution), and use the remaining $1 to pay down the mortgage. If you ever have financial difficulty in the future, the contributions to the Roth IRAs can be withdrawn without any penalty, which makes this money much more liquid than home equity.

If you have any high interest debt, I would pay that down first.

Best of Luck,

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